Alec Baldwin stars in a Capital One commercial: The credit card company is the first punished by the Consumer Financial Protection Bureau on charges of misleading customers. YouTube

July 19, 2012

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This week, the credit card company Capital One — famous for its viking-laden commercials and the slogan "What's in your wallet?" — agreed to pay $210 million to settle charges that it had overcharged its customers and misled them into buying unnecessary products. The settlement involved the first enforcement action taken by the Consumer Financial Protection Bureau (CFPB), an agency created in 2010 by the Dodd-Frank Act, a sweeping overhaul of the financial regulatory system. President Obama has championed the CFPB, saying it will protect consumers from the types of predatory lending practices that preceded the 2008 financial crisis. Here, a guide to Capital One's settlement and the implications for consumers:

What did Capital One allegedly do?The CFPB says consumers with low credit scores were led to falsely believe that certain "add-on" products — such as payment protection or credit monitoring — would improve their credit scores. Some salespeople claimed that the products were required, and some customers were enrolled without their consent.

What does Capital One say?Capital One did not admit wrongdoing in the settlement, and company officials claim that any violations were committed by salespeople at third-party call centers. However, the company did apologize and pledged to regain the trust of customers. Affected customers are expected to receive about $100 each in repayment.

Is this what the CFPB is supposed to do?Yes. The CFPB was created to protect consumers — many of whom are unfamiliar with the complex terms and conditions of financial agreements — from precisely these types of scams. The impetus for the CFPB was the subprime mortgage crisis, in which unsophisticated borrowers with poor credit were unwittingly pushed into loans in which interest rates spiked after a few years, causing a cascade of defaults. Going forward, the federal agency will monitor banks, mortgage providers, pay day lenders, and other financial institutions.

What else has the CFPB done?The settlement with Capital One was its first enforcement action, but the agency has also unveiled an online database that tracks customer complaints against credit card companies. (Capital One tops the list.) The case against Capital One is also seen as a warning to other credit card companies and banks to clean up their lending practices.

Is the agency controversial?Yes. Republicans want to curb its powers, saying it will disrupt the flow of credit and hurt the broader economy. Mitt Romney, the GOP's presumptive presidential nominee, has said he will repeal the Dodd-Frank Act if elected.